M1 Limited announced yesterday an agreement to let Liberty Wireless access to its mobile network, making it the first mobile virtual network operator (MVNO) to offer voice, messaging and data services to postpaid customers in Singapore. Under its operating brand, Circles Asia, Liberty aims to transform the regional telecommunications industry by introducing innovative packages and an unparalleled customer experience. Circles Asia is expected to begin offering its mobile service towards the end of 2015.

According to Circles Asia’s website, it will introduce “the most innovative data focused mobile packages and an unparalleled customer experience”. M1 revealed that also hosts two MVNOs offering prepaid mobile services to consumers. We think that this is an interesting development ahead of the potential introduction of a fourth telco as it may actually make it more difficult for the newcomer to fight for market share in an already saturated market.

On the other hand, the move could also chip away at M1’s own market share and make it more difficult for the incumbents to raise ARPU, especially if Circles Asia intends to use cheap data pricing as its main means of gaining market share. We will be speaking more with management to learn more about their longterm strategy. For now, we have a BUY on the stock with an unchanged S$3.66 fair value.

Source: OCBC Research - 9 Jul 2015